GROOUPUP LLIIMITEDMITED

Annual Report 2009 2 2009 Group Highlights 4 To the Shareholders 10 Bermuda Electric Light Company Limited 14 Bermuda Gas & Utility Company Limited 16 PureNERGY Renewables, Ltd. 18 InVenture Limited 21 Financial Information 22 Management’s Analysis 30 Report of Management 31 Auditors’ Report 32 Financial Statements 36 Notes to Financial Statements 48 Comparative Statistics 51 Corporate Information ASCEN DANT G ROUP AT A G LANCE

MISSION 2009 ACHIEVEMENTS 2010 GOALS

Ascendant Group Limited was established in 2009, replacing To maximise shareholder value Name change. Develop opportunities BELCO Holdings Limited as the through growth in existing Incorporated InVenture. for revenue generation. publicly traded investment holding energy-related businesses company. and investment in utility and infrastructure companies.

Bermuda Electric Light Company Limited was established in 1904 as Bermuda’s To provide a secure, reliable Achieved reasonable financial Move forward on Central sole supplier of electricity. BELCO and sustainable electric results despite downturn in Plant development and operates generating plant and power system for the people economy in last quarter. Com- the New Energy Equation transmission and distribution systems of Bermuda. menced installation of three for Bermuda. to service over 35,000 metered new gas turbines. Delivered connections. draft Interconnect Agreement to Energy Commission.

Bermuda Gas & Utility Company Limited was established in 1936 as a To provide environmentally Increased net earnings, Grow propane gas, distributor of propane gas and responsible energy products returning the company to parts and service and operates an appliance and service and services, while normal levels of profitability. appliance markets. centre. The Company was purchased delivering exceptional value by BELCO in 1994. to its customers, employees and shareholders.

PureNERGY Renewables, Ltd. was incorporated in 2008 to offer To provide alternative Completed high-quality Break even financially. customised, small-scale renewable energy options that deliver residential installations. Make progress on systems to Bermuda’s residential and genuine value to its Planning permission and commercial markets. PureNERGY customers, employees interconnection issues. delivers integrated, sustainable, and shareholders. renewable power solutions through a combination of technologies: solar photovoltaic, solar-thermal hot-water systems and wind turbines.

InVenture Limited was established in 2009 to pursue To maximise shareholder Formalised initial Bring new project s/ diversified investment opportunities value through diversified business plan. businesses on board. outside of the energy business. investment in non-correlated utility and infrastructure opportunities.

BELCO Properties Limited was incorporated in 1996 and is a Oversaw management of Increase net earnings property rental and development Serpentine Properties . and expand the company established to manage those company’s scope. group properties that are not used in the Focus on 100% rental production or distribution of electricity. occupancy.

BTS Limited was established in 1995 and is a subsidiary investment holding company. 2009 G ROUP HIGHLIGHTS

2009 2008 % CHANGE

Net Earnings $ 19,506,881 $ 20,099,108 -2.95 Basic and Fully Diluted Earnings per Share $ 1.88 $ 1.95 -3.59 Dividends $ 8,775,074 $ 8,759,492 0.18 Dividends per Share $ 0.85 $ 0.85 0.00 Market Price per Share (as at 31 Dec.) $ 15.05 $ 18.00 -16.39 Book Value per Share (as at 31 Dec.) $ 31.05 $ 30.07 3.25 Total Assets (as at 31 Dec.) $ 377,161,649 $ 351,479,751 7.31

CAPITALISATION (Millions of dollars) 321.1 309.7 295.5 282.8 268.9

NET EAR NI NGS (Millions of dollars)

13.3 19.0 12.5 11.8 11.3 10.7

7.0 7.0

8.8 8.8 8.3 8.6 7.9 0.0 0.0

05 06 07 08 09

G Shareholders’ Equity G Long-Term Debt

05 06 07 08 09

G Dividends G Net Earnings Retained

2 BOOK VAL UE A ND MARKET PRICE OF SHARES (Dollar values are per share as at 31 December of each fiscal year) 31.05 30.07 28.64 27.48 26.21

INVEST MENT IN PROPERTY, PLANT AND EQ UI PMENT 23.00 (Millions of dollars) 21.00 38.7 20.18

37.2 18.00

32.0 15.05 30.2

26.0

05 06 07 08 09

G Book Value G Market Price

DIV IDE ND YIELD (Percent)

3.82 3.53 3.96 4.73 5.64

05 06 07 08 09

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 3

DEAR FELLOW SHAREHOLDERS

With the support of shareholders at We believe in Bermuda’s future, and the 2009 Annual General Meeting, the our Group is committed to playing a name of our holding company was vital role in keeping the Island vibrant. changed to Ascendant Group Limited. Consequently, the Ascendant Group More than just a new name, however, is well positioned to help rebuild this represents a fundamental shift in Bermuda’s ageing infrastructure to focus for all of our operating companies, restore the success of tourism and along with diversification and growth enhance the international business into industries other than energy. model.

As members of the newly branded Of course, BELCO and Bermuda Gas Ascendant Group, Bermuda Electric are well-known entities in the Bermuda Light Company Limited (BELCO), marketplace, and PureNERGY is quickly Bermuda Gas & Utility Company earning a reputation for delivering effec - Limited (Bermuda Gas), PureNERGY tive, customised, small-scale renewable Renewables, Ltd. (PureNERGY), and energy solutions. Each of these compa - newly formed InVenture Limited are nies continually seeks opportunities to managing people, performance and innovate in order to increase income or profit from a Group perspective, with control costs. We recognise that each emphasis on building on core strengths has unique challenges that it must across our businesses to develop new overcome to ensure continued success. opportunities. BELCO is navigating a new regulatory environment, while Bermuda Gas seeks Given current economic and regulatory new applications to grow the propane uncertainties, our operating companies gas market, and PureNERGY is helping are taking a focused, but flexible, the Island develop a small-scale renew - long-term approach to business. The able energy market, contributing to the Ascendant Group of companies will framework that will lead our community succeed by finding opportunities in the to be less reliant on imported fossil evolving, competitive energy industry fuels. and in other relevant industries.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 5 TO THE SHAREHOLDERS

In addition to exploring new revenue As a result, earnings per share from opportunities in the energy industry, operations decreased 3.59 percent Ascendant’s long-term success in 2009 to $1.88, down from $1.95 in depends on developing new business 2008. We expected 2009 to be a opportunities outside the energy indus - challenging year for BELCO, but are try. That is why, shortly after rebranding pleased that Bermuda Gas saw signifi - the holding company, we formed cant improvement in net income, InVenture Limited. Its mission and earning $1,268,408, as compared to business plan are detailed later in this 2008 net income of $419,383. report, but in essence it was estab - PureNERGY reported an operating loss lished to provide the Group with a of $1,100,539 for the year, compared to vehicle for new business development. a loss of $580,217 in 2008. We expect The core strengths that distinguish the PureNERGY to break even in 2010 Ascendant Group are our engineering and will look for positive results from and technical expertise, large-project InVenture. management skills and financial capacity, coupled with a solid reputation To mitigate the effects of the economic in the marketplace. Like the existing recession on our financial performance operating companies, InVenture will in 2009, we focused across the Group work to identify new opportunities on reducing or deferring expenses. that are supported by these strengths. We will do the same in 2010, as the Island’s consumers and businesses also While our companies are strong and continue to tighten their belts. We are well positioned to succeed, we must planning capital projects selectively, emphasise that, for the foreseeable and operating our companies efficiently, future, we expect to continue facing with skill, flexibility and emphasis on enormous economic, industry and innovation. With our companies work - regulatory challenges. We anticipate the ing cooperatively and beginning to economy will remain unstable through engage jointly in integrated resource 2010, and perhaps will not recover until planning, we also expect to realise 2012. The economic downturn has synergies and economies of scale had serious impact on Bermuda’s retail, that will have a positive impact on the construction and hospitality sectors, bottom line and, in turn, on the return which in turn has had an impact on our we provide to our shareholders. companies. As discussed later in this report, consolidated net earnings decreased from 2008 adjusted results of $20,099,108 to $19,506,881 in 2009.

6 Left to right: J. MICHAEL COLL IER Chairman

A.L. VINCENT INGHAM President & Chief Executive Officer TO THE SHAREHOLDERS

With respect to regulation, we have In addition, at the time of this writing, continually endeavoured to forge good Government’s 2010 Budget had just working relationships with Government, been released. While we were encour - particularly the Ministries of Energy and aged to see that it mentioned Customs the Environment and the new Energy duty relief for energy-efficient products Commission. In all of our discussions, and requirements for future buildings to we are stressing the urgent need to be “green ”, we were disappointed by move forward with regard to BELCO the lack of specifics, as well as reduced Central Plant development, as well as funding for the Ministry of Energy. We participating in public discussions on are concerned that this may indicate renewable energy, and providing input a lack of priority is being given to the to the Energy Green and White Papers. Island’s critical energy issues. We also delivered BELCO’s proposed Interconnect Agreement to the Energy Government has stated that it wants Commission. Amongst the key issues less reliance on imported fossil fuels, that require Government’s attention: but has established neither targets duty relief on energy-efficient and nor a plan for accomplishing this goal. small-scale renewable products, BELCO is committed to ensuring that Planning permission for development Bermuda’s new energy equation of BELCO’s Central Plant and for small- incorporates both large- and small- scale renewable projects, interconnec - scale renewable energy sources. The tion policy and the introduction of large- company has targeted delivery of 20 scale renewables to Bermuda’s energy percent of Bermuda’s energy from mix. To date, we have seen no action renewables by 2020. While achieving by Government, nor have we had BELCO’s goal will reduce the Island’s meaningful feedback on subjects that reliance on imported fossil fuels, 80 are critical to ensuring reliable infra - percent of energy will still come from structure into the future. conventional fossil-fuel generation. In 2009, BELCO introduced several potential large-scale renewable energy providers that demonstrated interest in establishing businesses in Bermuda when they responded to our 2008 Solicitation of Interest. Unfortunately, to date, the Government of Bermuda has not acted to bring these or any other large-scale renewable energy producers to the Island.

8 The Ascendant Group understands that Open, honest communication across Our operating companies are sustain - our businesses must work in partner - the Group is vital to our future and plays able enterprises that will provide on- ship with Government, both for the suc - a role in our ability to attract and retain going benefits to loyal employees and cess of our companies and our Island, key employees. People are the bedrock investors. The companies’ business and will persevere in working to realise of our Group. We are committed, plans and commensurate actions are viable energy solutions for Bermuda. therefore, to maintaining a diverse, but driven by the requirements to meet predominantly Bermudian, workforce customer and community needs, That said, partnerships underpin much and to working on succession planning, including environmental stewardship, of Ascendant’s work, and none more as well as managing labour costs and and to improve shareholder value. so than our relationship with CARILEC, emphasising staff accountability, the Caribbean association of electric productivity and innovation. We are proud that, despite the global utilities, through which we share economic recession, which has includ - knowledge and support. Staff through - Innovation is essential in these rapidly ed severe downturn in stock markets, out our Group are involved with changing and highly competitive times. our share price has remained reason - CARILEC, including Ascendant That’s why, in 2009, we introduced the ably stable. Ascendant’s goal is to President & Chief Executive Officer Ascendant Impact Award. The award build on our strengths and stability to A.L. Vincent Ingham who, in 2009, was recognises employees’ outstanding increase the price of our stock, which invited to sit on the Board of Directors contributions toward achieving the we have long believed is undervalued. for two years. Also, Mr. Ingham’s partic - mission and vision of the Ascendant We also wish to broaden our sharehold - ipation as a member of the “Bermuda Group and its operating companies. er base. Ascendant Group Limited is First” Infrastructure Development Nominees were judged on innovation, committed to long-term success for the Committee provides a significant initiative, judgment, work performance benefit of our shareholders, our employ - opportunity to keep Bermuda’s energy and productivity, integrity, dependability ees and pensioners and the Bermuda challenges in the forefront of Govern- and cooperation. From amongst a group community, which trusts us to remain ment and business leaders’ minds. of outstanding nominees, the winner a stable economic force, as well as the of the first Ascendant Impact Award supplier of essential energy solutions. While we spend considerable time was Senior Reliability Engineer addressing the external influences on Abayomi Carmichael, for innovation in our business, Ascendant’s operating plant reliability-centred maintenance companies are increasingly focused on that will enable BELCO to manage internal relationships, so that we may costs more effectively. better align goals, plans and actions across the Group, acknowledging that, while we have much to gain from J. MICHAEL COLLIER synergies, the operating companies Chairman are also competitors in some areas.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 9

BERMUDA ELECTRIC LIGHT COMPANY LIMITED

As the 2009 financial results indicate, The company needs to be certain that, BELCO is feeling the strain of the eco - going forward, we have the necessary nomic recession, as are other business - cash flow to support current and long- es across the Island and around the term operational and capital require - world. We expect 2010 to be another ments. We also need immediate action challenging year that will see BELCO by Government on energy-related continue to be affected by economic issues. slowdown, changes in the energy industry, competition and an uncertain To ride out anticipated economic regulatory environment in Bermuda. instability for the next two or three In the midst of these challenges, years, BELCO is carefully weighing however, we are seeking innovative those projects that must be undertaken ways to manage and define the future today against what can be deferred. of the company, as we continue We have given high priority to manag - measuring the performance of plant, ing costs, getting permission for new process and people. plant and extending the life of existing plant. To this end, we have changed Plant operation and maintenance, as well our asset replacement strategy from as Central Plant expansion and decen - age-based to reliability- and risk-based. tralisation, are fundamental issues for BELCO has an ageing generating plant, BELCO, as we work to fulfil our mission but also modest load growth. now and to put in place 20-year plans.

2009 BELCO HIGHLIGHTS 2009 2008 % CHANGE

Sales of Electricity (Net of Fuel Adjustment) $ 150,633,797 $ 144,114,500 4.52 Kilowatt Hours Generated 738,455,497 728,937,906 1.31 Barrels of Fuel Used 1,068,599 1,019,696 4.80 Customs Duty on Barrels of Fuel $ 16,135,845 $ 15,397,410 4.80 Kilowatt Hours Sold 656,082,293 644,954,448 1.73 Peak Load (Kilowatts) 122,300 119 ,800 2.09 Load Factor 68.02% 68.67% -0.95 Number of Metered Connections 35,558 35,356 0.58

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 11 BERMUDA ELECTRIC LIGHT COMPANY LIMITED

In 2009, BELCO began work to install ambiguous regulatory environment. three new gas turbines in its West At the same time, we continue to plan Power Station, replacing old gas turbine and take action, as Central Plant devel - units that were past their normal oper - opment will remain a key component of ating lives. This work will be completed Bermuda’s long-term energy security. in the second quarter of 2010. These turbines are intended for peak or To meet Bermuda’s immediate energy emergency generation, as they are needs, we must order generating more expensive to run than larger, equipment from suppliers in 2011, so more efficient diesel engines. that it can be manufactured, delivered, installed and commissioned in 2013 Work also commenced in 2009 to and 2014 for the first phase of plant extend the operating life of engines in development. Along with resolution on the oldest section of BELCO’s West Central Plant expansion, we also await Power Station, but over the next critical decisions related to small-scale several years, these engines will have renewables and the location of distrib - to be retired. Consequently, new plant uted generation sites, including sites installation will be required in 2013 and for large-scale renewables, as all are 2014 to replace the existing generating components of the integrated energy capacity. In addition, based upon plan for Bermuda. current load growth projections and required plant retirement, Bermuda will As previously stated, Government has require 100 megawatts (MW) of new expressed interest in reducing reliance supply over the next decade to meet on imported fossil fuels, but has yet to increasing demand. establish specific renewable energy tar - gets or policies. Clearly, the introduction Since 2005, BELCO has been in of large-scale renewables to the Island discussions with Government regarding will require participation by both BELCO Plant development to meet the Island’s and Government. We realise that the energy requirements but, to date, has addition of large-scale renewable power received neither feedback on how we producers to the Island is essential, and may redevelop the existing plant site, look forward to this as an opportunity to nor assurance that permissions for new plan for competition and potential new plant will be granted. partnerships. That is why, at our own expense, BELCO initiated meaningful This lack of action is placing the discussion of large-scale renewable long-term security and reliability of energy sources for Bermuda when we Bermuda’s electric power system at issued a Solicitation of Interest in fall significant risk. BELCO is taking a 2008. From this process, five viable wait-and-see approach to several large candidates were selected, representing capital projects due to the unstable waste-to-energy, biomass, ocean, wind economy, uncertainty about future and solar power production. In 2009, major hotel developments, changes we brought these candidates to within the energy industry and the Bermuda to meet with Government,

12 and to present their proposals at two While we have had to devote much of began to take shape and, at the time public forums, which we hosted at our attention to external matters, of this writing, a full-scale ISO 14001- Bermuda College. BELCO may have BELCO also maintains sharp focus on compliance audit was underway. been ahead of the curve in looking for internal processes. The economic Similarly, we have adopted the ISO viable large-scale renewable candidates downturn has had an impact on electric - 18001 Occupational Health and Safety in 2008 but, to date, Government has ity usage by residential and commercial Management System. In 2010, ISO not further pursued any of these candi - customers, and has influenced progress 18001 focus will be on implementation dates. Unfortunately, these companies towards energy efficiency. Despite with particular attention to hazard have now lost interest in Bermuda, as BELCO’s tightly controlled collection identification, risk assessment and they are occupied with other ventures, process, the recession has also determination of controls and training, largely due to the American Recovery produced a worrying trend in late with the objective of certification within and Reinvestment Act of 2009, the payments, resulting in an increase in the next several years. Adoption of enormous stimulus package focused customer disconnections. In addition, ISO management system standards is on creating “green” jobs in energy and we have seen a rise in instances good for our business and for our staff, the environment in the United States, of electricity theft, as a number of providing new opportunities and and favourable incentive programmes customers have resorted to the improving our work environment. in Canada. extremely dangerous practice of illegally reconnecting their supply. We are entering a new era of competi - The other key component of Bermuda’s tion and, therefore, must be increasing - new energy equation is small-scale We are working to address this issue ly productive and innovative. We have renewables. In 2009, BELCO filed a in several ways by helping customers placed renewed emphasis on attracting draft Interconnect Agreement with the better manage their accounts. Thanks to and retaining staff, as well as formalis - Energy Commission that would allow our new customer information system, ing succession plans. This is accompa - residential customers to connect to which was launched in January 2009, nied by clear focus on increasing com - BELCO’s system. The company has we are able to offer customers the munication and strengthening employee stated that, in the first instance, 750 options of paperless billing, direct debit, relationships, as well as increasing customers would be able to connect, on-demand debit, payment online or by accountability and productivity, and enabling BELCO to pilot and evaluate phone and, soon, levelised billing. These optimising the total cost of labour for this process. The proposed policy choices help ensure that payments are the long-term health of the company. still awaits resolution by the Energy made on time, discounts are received Commission. and monthly bills are never a surprise. BELCO also continues to develop Of course, BELCO also continues to community partnerships, in part through BELCO also participated in information encourage residential and commercial corporate contributions. In 2009, we sessions on, and responded to, customers to use energy efficiently to developed a formal contributions policy Government’s Energy Green Paper. help manage their bills, while contribut - and, in light of difficult economic times, We now await progress on the Energy ing to a cleaner environment. decided to narrow the scope of our White Paper and, ultimately, on legisla - donations for the time being. We will tion. From BELCO’s vantage point, The environment is a fundamental concentrate our resources on organisa - preparing for Bermuda’s near- and factor in BELCO’s operation. In 2008, tions that help families and senior citi - long-term energy future has become we established a formal environmental zens in particular, although we continue a daunting task, given the lack of policy by adopting ISO 14001, the to contribute to Bermuda-registered progress on the Planning process and international standard for environmental charities and other local organisations the continued uncertainty regarding management. In 2009, work towards that work to improve the environment energy industry regulation. becoming ISO 14001 certified truly and the quality of life on the Island.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 13 BERMUDA GAS & UTILITY COMPANY LIMITED

The restructuring of Bermuda Gas in We will also be educating the communi - 2009, including changes to the manage - ty about the myriad uses for propane ment team, has resulted in a plan to gas, as well as the benefits associated guide the company over the next five with using it along with energy-efficient years that encompasses sharper focus appliances. Globally, propane gas is on service excellence, innovation and already the most widely used alterna - competitiveness. The new manage - tive fuel, because it is clean, efficient, ment team has embraced the opportu - economical, safe, non-toxic and non- nity to make changes that affect the polluting. company’s processes, policies and per - formance, while it continues to provide In 2009, Bermuda Gas started building practical, efficient solutions for our on, and contributing to, synergies with residential and commercial customers. partners inside the Ascendant Group, as well as with external strategic partners. Bermuda Gas’ strategic focus is on Like the other Ascendant Group operat - maximising competitive advantage, pro - ing companies, we regard Government viding customers with superior service, as a key strategic partner, particularly improving operational efficiency and with regard to Customs duty on energy- developing employees to industry stan - efficient products and expanded use dards. While success in each of these of propane gas as an alternative fuel. Of objectives is essential to the company’s course, Bermuda Gas is also committed long-term sustainability, none will have to fostering relationships that help more impact on the bottom line than improve the quality of life on the Island the ability to increase market share. by contributing to local charitable organ - isations and taking part in local events, By maximising our competitive advan - such as career fairs. Bermuda Gas will tage, Bermuda Gas will increase market remain focused on developing and share in each of our primary lines of maintaining these strong relationships business, while also generating revenue to ensure overall organisational growth from increased sales of propane success. gas, parts, service and appliances. Our 2010 marketing plan includes intro - ducing new environmentally responsible products, and encouraging input from our customers about how we can better serve them.

14

PURENERGY RENEWABLES, LTD.

Small-scale renewables are poised to Although PureNERGY, which is still a Economic recovery is forecast to be play a vital role in Bermuda’s overall start-up company, fell short of meeting slow, and energy industry regulation energy mix, helping to reduce reliance financial targets in 2009, the company is just beginning to take shape in on imported fossil fuels. They also has made inroads in the marketplace. Bermuda. We have targeted a break- empower residential and commercial Several PureNERGY installations were even position in 2010, but are optimistic consumers by providing energy choices completed, setting a standard for small- that progress on the economic and and ensuring reliability of energy scale renewables in Bermuda. We regulatory fronts will lead to profitability supply in the event of power outages. completed commercial solar hot water in the years ahead. By managing PureNERGY offers customised and solar photovoltaic installations for operational expenses and leveraging solutions to those who value energy Tucker’s Point Club and A.C. Brewer synergies across the Ascendant Group, independence and “going green ”, Distributors, and completed three major PureNERGY will remain forward- incorporating solar photovoltaics, residential installations, while also looking, continuing to market its prod - solar hot water and pool heating and beginning work on a fourth. In addition, ucts and form partnerships that will micro-wind turbines, while also giving 2010 looks set to have more proposals benefit the company and the Group. customers the ability to monitor system that are in circulation transitioned into performance online. contracts and projects. At the same time, in 2010 we will leverage the experience gained since While consumers indicate that they PureNERGY was formed in 2008. To are interested in solar and micro-wind build the business and increase income, technologies, efforts to convert interest we will take innovative steps to max - into reality are hampered by economic, imise performance and productivity by planning and permitting and regulatory improving internal processes, introduc - challenges. Bermuda’s economic down - ing new products and services such turn has caused even high-net-worth as energy audits, reducing the cost of consumers and the most solid com- project design and implementation and panies to shift priorities. At the same further developing employees’ technical time, those who can afford to install skills to support business expansion. small-scale renewables are waiting to Company management is also focused learn about Government incentives for on increasing staff commitment and incorporating alternative energy job satisfaction, including empowering sources, as well as approval of the effective decision-making. PureNERGY interconnect policy, and corresponding will continue to educate the community net metering rates. about utilising alternative energy in an island environment and has the poten - tial to lead Bermuda’s green industry, creating jobs and opportunities for Bermudians.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 17 INVENTURE LIMITED

Ascendant Group took a major step in Through InVenture, the Group has a a new direction in 2009, forming vehicle that will focus on influencing InVenture Limited with the goal of the direction for replacing Bermuda’s enhancing the Group’s future financial aged infrastructure, including develop - performance. The new subsidiary ment of replacement solutions, financ - provides the opportunity to diversify ing options and delivery time frames. into other industries by acquiring If Bermuda is to be amongst the existing companies or creating new world’s top financial centres, then business opportunities, building on core significant reinvestment in infrastruc - strengths that include engineering and ture is required. The new company project management. In addition to enlarges the Group’s scope for develop - developing new revenue streams, ing and strengthening relationships. InVenture will pursue unique or domi - It also has the potential to broaden nant positions in other industries that opportunities for the Group’s employees provide synergistic or strategic benefits to grow and expand skills, while devel - to the Ascendant Group. Opportunities oping new businesses and employment realised by InVenture may take the form prospects in the community. of acquisitions, joint ventures, start-ups, minority-interest positions or mergers. As relationships are grown and cultivat - ed by InVenture, we envisage the pool of opportunities for investment will likewise expand. Initially, all focused expansion is within Bermuda, but Group diversification outside of Bermuda is also a target. InVenture will evaluate capital-raising options to pursue new opportunities, and will look for innovative ways and means to deliver solutions that benefit the Bermuda community.

18

MAN AGE MENT’S ANALYSIS OF RES ULTS A ND FINANCIAL CONDIT ION

ASCE NDA NT Consolidated net earnings dropped from 2008 restated results of $20,099,108 to $19,506,881 GROU P in 2009. As a result, earnings per share from operations decreased 3.59 percent in 2009 to $1.88, down from $ 1.95 in 2008. In 2009, net income results from Ascendant’s subsidiaries were mixed, as reported in detail below.

The highlight for 2009 was significantly improved net income results reported by Bermuda Gas of $1,268,408, as compared to 2008 net income of $419,383. BELCO entity results fell approx - imately $392,833 to $19,655,639, from 2008 results of $20,048,472, adjusted for a change in accounting policy for major overhauls. Subsidiary PureNERGY Renewables, Ltd., which provides small-scale renewable solutions to the Bermuda market, experienced a challenging year in 2009, reporting an operating loss of $1,100,539 for the year, compared to a loss of $580,217 in 2008 following its incorporation in May and initial operation. BELCO Properties Limited recognised a net income of $255,771 compared to $311,308 in 2008.

The market price of Ascendant’s shares declined in 2009, from an opening value of $18.00 to a year-end price of $15.05. This is in part due to investors liquidating holdings to find better re- turns in alternative investments, divesting from equity holdings to acquire cash, or to minimise equity holdings following volatility in equity markets over the last two years. Management con - tinues to believe that the share price is undervalued, as the book value of shares at year end was $3 1.05. We do not believe the market price reflects the long-term value of the organisation.

The 2009 cash dividend of $0.85 per share was unchanged from 2008. The 2009 dividend yield, based on the year-end stock price of $15.05, was 5.64 percent compared to 4.73 percent in 2008, based on the 2008 year-end price of $18.00 per share.

BE LCO Electricity Operating Revenue Sales of electricity, net of fuel adjustment income, increased $6,519,297 in 2009 to $150,633,797, up from the $144,114,500 achieved in 2008. Basic tariff rates and facility charges increased an overall average of 2.75 percent in 2009, providing additional revenue to BELCO of $4,026,660. The balance of the increase, $2,492,637, is the result of a 1.72 percent increase in the number of kilowatt hours (kWh) sold. Fuel adjustment income decreased $22,171,692 to $76,374,743 in 2009, from $98,546,435 in 2008, as fuel costs declined dramatically. The corre - sponding decrease in fuel costs is reflected in the Energy Supply group costs.

The table below presents the specific kWh sales levels and changes in the various rate classes .

2009 2008 KWH SALES % CHANGE KWH SALES % CHANGE

Residential 271,682,027 1.17 268,562,854 -2.58 Commercial 326,727,757 2.42 319,018,055 1.49 Other 57,672,509 0.53 57,373,539 6.62 Total 656,082,293 1.73 644,954,448 0.17

22 Residential Residential kWh sales increased 1.17 percent in 2009, following a decrease in 2008 of 2.58 percent. Average consumption per customer increased marginally by 0.53 percent during the year to an average monthly consumption of 698.59 kWh. Increased average consumption accounted for 1,433,856 kWh of the total increase of 3,119,173 kWh in residential sales. The balance of the increase, 1,685,317 kWh, is a result of consumption by 201 new residential customers.

Commercial and Other Sales in the Commercial sector were up 2.42 percent, or 7,709,702 kWh, compared to an increase of 1.49 percent in 2008. New customers coming on line in 2009, or existing customers whose consumption rose significantly during the year, include Tucker’s Point Club, Victoria Place, Consolidated Water (Bermuda) Ltd., the new Argus Building, The Reefs Hotel & Club, Newstead Belmont Hills Golf Resort & Spa, and Cable & Wireless. Increased demand from active commercial customers, along with sales to new customers, offset lost commercial sales due to business closures and decreased operating activity by various other commercial busi - nesses, most notably hotels.

BELCO’s peak demand for 2009 of 122.3 megawatts (MW) occurred on 17 August 2009 at 1:30 p.m. The evening peak for the year of 120.9 MW was recorded on the same date at 8:30 p.m. This year’s peak is 2.08 percent higher than the 2008 peak of 119.8 MW. This increase in demand is directly related to more large commercial customers, noted above, coming on line during the year.

Other Revenues Consolidated other income decreased marginally from $ 1,70 7,491 in 2008 to $1,643,904 in 2009. Earnings from other revenue sources, such as meter and line connections, encroach - ments and leases, have remained relatively consistent year on year.

Electricity Operating Expenses Changes in levels of Operating Expenditures are as follows:

200 9 200 8 % %

Energy Supply (fuel) ($ 20,644,179 ) -15.94 $ 43,720,261 50.97 Energy Supply (net of fuel) 764,930 2.79 3,354,534 13.95 Energy Delivery 172,024 1.89 549,416 6.40 Administration and General 4,288,381 15.57 (2,366,693 ) -7.91 (Ascendant Group Limited) Depreciation and Amortisation 249,348 1.20 1,504,621 7.78 (Ascendant Group Limited)

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 23 MANAGEMENT’S ANALYSIS OF RESULTS AND FINANCIAL CONDITION

Energy Supply (fuel) Fuel costs are the most significant of the Energy Supply expenses. This year, total fuel costs decreased $20,644,179, from $129,487,548 in 2008 to $108,843,369. This decrease is largely due to the lower cost of fuel. The average cost of a barrel of fuel decreased $25.25, or 20.02 percent, from $126.11 in 2008 to $100.86 in 2009, resulting in a savings of $25,747,324 in fuel costs. These savings were offset by a decline in 2009 generation efficiency, as well as an increase in generation volume. The group produced an average 682 kWh for each barrel of fuel used in 2009, a decrease from the 707 kWh produced in 2008. This decrease is primarily due to the loss of engine E7 for an extended period of time during the year, requiring less-efficient plant to be operated to meet generation demand. Decreased efficiency led to an additional 35,437 barrels of fuel being consumed, costing approximately $3,744,964. Overall generation increased from 728,937,906 kWh in 2008 to 738,455,497 kWh in 2009, an increase of 9,51 7,591 kWh or 1.30 percent. This increased generation volume required approximately 13,466 more barrels of fuel to be used in 2009, costing approximately $ 1,358,18 1. BELCO’s cost per barrel of fuel includes a Customs duty charge of $15 .10 per barrel. In 2009, BELCO paid $16,135,845 in Customs duty on fuel.

Energy Supply (net of fuel) Energy Supply expenses increased by $764,930 in 2009. Labour-related costs increased $1,456,357, due to increases in wages and related benefits, staffing and overtime. Additional maintenance, stemming from the loss of engine E 7, the subject of an insurance claim, resulted in significantly increased overtime costs due in part to additional emergency work on other plant, which was run in replacement. The loss of engine E7 also incurred additional fuel, lube oil, labour and material costs. Lube oil costs increased overall by $2,170,557 during the year, primarily due to significant increases in lube oil prices. The average price paid for a US gallon of lube oil in 2009 was $13.04 as compared to $7.96 in 2008. Additional lube oil was also used, stemming from the loss of engine E7, as engines operated as replacements to this unit are less efficient and burn significantly more lube oil. In addition, staff in Energy Supply had to perform several lube oil sump changes in advance of normal replacement, because remaining plant was run in excess of normal expectations.

Maintenance contract costs increased $2,193,526, due to a new five-year engine parts and service contract signed with MAN Diesel, effective 1 January 2009. This contract enables BELCO to obtain multiple benefits, such as significant discounts on engine parts, transfer of inventory responsibility to the service provider, established yearly payment dates for cash flow planning purposes and improvements to the Company’s insurance position, as a result of dealing directly with the original equipment manufacturer. An agreement was reached with the Company’s union during the year, which will now increase the utilisation of internal staff to address major overhaul requirements. This new approach to addressing major overhaul work was taken with the aim to maintain plant at higher efficiency levels by returning engines to service more quickly to reduce fuel usage and cost, while also reducing costs associated with hiring outside contractors. Material issues in 2009 exceeded material issues in 2008 by $1,278,47 7, due solely to the fact that there were eight major overhauls incurred during the year, compared to four in 2008.

24 The increases noted on page 24 were gross and are offset in total by $6,493,949 of net defer - rals of major overhaul expenditure, as a result of the Company’s change in accounting policy for major overhauls in 2009. Such costs, when incurred, will now be initially deferred and subse - quently amortised to operations on the basis of the projected service hours, which typically extend beyond the end of the year in which the major overhaul is carried out. The Company made the change in accounting policy for major engine overhaul expenditure to improve the relevance of yearly financial reported results, which were previously influenced by the timing of scheduled major overhaul expenditures.

Energy Delivery Expenses in 2009 increased marginally by $172,024, compared to 2008. Increases in labour costs, following union-negotiated wage settlements finalised in 2009, were offset by an increased recharge of labour costs to capital projects when compared to 2008, resulting in a net increase of $186,38 7. Recruitment expenses decreased $134,550, as a number of vacant positions that arose in 2007 were filled in 2008 as a result of successful recruitment efforts. Outside contractor costs decreased as less fault work needed to be addressed in 2009 when compared to 2008. Material costs increased $285,888, as the Company addressed the overhead repair work required, following windstorms experienced during the year.

Administration and General Administration costs increased 15.56 percent, or $4,288,381, from 2008. Defined benefit pension plan costs increased $2,028,230 in 2009, following significant declines in returns from pension fund investments, a direct result of the challenging investment market in 2008. Salaries and wages, and wage-related expenses, increased $533,087 in 2009, due to increased staffing and the transfer of senior management costs out of the operating groups.

In 2009, $ 1,46 7,402 in costs were incurred due to inventory write offs of $ 1, 12 7,075 and prop - erty, plant and equipment write offs of $340,32 7. The inventory write offs are represented largely by parts specifically supporting engine D2, which was decommissioned during the year, having no ready market for resale. Repair of the failed D2 engine, originally installed in 1976, was not deemed cost effective, which resulted in the engine being retired. The property, plant and equipment write offs relate to the early decommissioning of four gas turbine engines during the year. Space utilised by these older engines was needed to erect three new gas turbine engines required to meet capacity requirements, as BELCO was forced to adjust its expansion plans when the decision to allow the addition of slow-speed diesel plant was deferred.

The Company incurred $108,311 in costs associated with conversion of its accounting policies and financial reporting under Canadian and Bermudian generally accepted accounting principles to International Financial Reporting Standards (IFRS). In preparation for IFRS reporting in 2011, BELCO began a systematic elimination of all assets and liabilities not allowed under this basis of accounting, which resulted in the write back of $700,000 in specific provisions. The balance remaining at 31 December 2009 will be written off in 2010.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 25 MANAGEMENT’S ANALYSIS OF RESULTS AND FINANCIAL CONDITION

Depreciation Given the capital-intensive nature of BELCO’s operations, depreciation is one of the largest sin - gle operating costs, representing 9.98 percent of total operating expenditures this year. The net increase in depreciation expense of $249,348 is primarily due to a net increase of $13,688,857 in the fixed-asset base related to capital assets placed in service. The increase in depreciation expense for newly capitalised assets was offset by a decrease in depreciation expense, due to existing fixed assets reaching the end of their useful lives during the year, and their cost amor - tisation is no longer included in depreciation expense.

Interest The Company has maintained throughout the year a $35 million credit facility with The Bank of N .T. Butterfield & Son Limited, which matured on 28 February 2010. Subsequent to the Company’s year end, this facility was renewed and now expires on 28 February 2011. Along with financing fuel shipment receipts, this facility was used during the year to address working capital requirements. Interest costs for 2009 of $258,812 include loan facility renewal fees of $61,250 (2008: $51,563). The 2009 effective rate of interest on outstanding debt of 5.08 per - cent was slightly higher than the effective rate of interest on outstanding debt of 4.29 percent in 2008.

Construction BELCO invested $36,811,866 in capital projects in 2009, compared to $23,409,763 in 2008.

Energy Supply capital expenditures in 2009 totalled $15,803,276.

Under BELCO’s Central Plant development plan, $12,035,457 was spent as construction com - menced on installation of three new, more efficient gas turbines scheduled to be commissioned in 2010. These new gas turbines are required to provide the Company with needed capacity to meet future demand.

BELCO spent $719,820 on various engine mechanical works as part of its ongoing effort to enhance safety and improve operational and maintenance processes. Work undertaken result - ed in improvements to the Company’s rainwater collection tanks throughout the plant, collection of water condensation from engines E5 to E8 to be used for plant processes and building serv - ices, installation of raw water filters to increase fuel separator availability, replacement of pipe work and ventilation refurbishment. High-quality water is necessary for the efficient running of plant and lower maintenance costs.

Revisions to BELCO’s operating licence by the Environmental Authority required the Company to incur an additional $509,480 to acquire and install two additional opacity analysers and equip - ment to engines E7 and E8 during the year. The Company spent a further $326,949 on additional site remediation equipment to increase the overall volume of waste oil extracted from the sub - surface at the main plant, as part of its ongoing remediation programme as stated by the Water Rights conditions and reporting requirements issued by the Environmental Authority, as well as compliance with ISO 14001 environmental standard requirements.

26 A total of $406,881 was also spent on extending the useful service lives of generation units D3, D8 and D10 to 2014, as part of BELCO’s overall strategy to meet future demand requirements, given the uncertainty surrounding Government approval to build new diesel plant. Project costs incurred to date represent a portion of a redesigned two-year plan estimated to cost approxi - mately $2,750,000 and considered necessary to meet future demand in the absence of Government approval to proceed with a new diesel plant.

Capital expenditure incurred by Energy Delivery in 2009 totalled $14,252,379.

A total of $2,863 ,761 was spent addressing customer-initiated projects requiring new supply services. Costs incurred to address new customer service included labour, installation, trans - formers, cables and overhead lines. Meter installations and transformer upgrades, facilitating new or altered low voltage customer service, cost the Company $98 1,903, while meter change- out work cost the Company a further $312,826.

The Company incurred costs totalling $2,514,393 as part of its ongoing effort to improve security of supply of both high and low voltage networks. Work was carried out on main and branch service lines, as well as substation switchgear in areas such as St. John’s Road, Park Road, Parsons Lane, Fractious Drive, Emily’s Bay Lane, Abbott’s Cliff Road and Fort Hamilton. A total of $2 ,109,488 was spent completing Phases 1 and 2 of the Company’s transmission sys - tem protection strategy, which was implemented to improve safety, protect transmission plant and minimise outages. To secure reliability of service, the Company spent $2,289,491 replacing a number of 22kV and 4kV switchboards throughout the Island. The Company deemed replace - ment of these switchboards a priority, given their advanced age and the significant number of customers that potentially would be affected in the event of their failure. Continued work on the Company’s Pender-to-Boaz Island project cost the Company an additional $ 1,495,324 during 2009. This project, as disclosed in last year’s annual report, is being carried out to improve the reliability of service between the Pender Road and Boaz Island substations. This project also allows the Company to consider remote generation from the Dockyard area in the future, should the need or opportunity arise, or to cable in feed from the Admiralty substation. The Company spent $283,231 on Phase 4 of its Court Street undergrounding project this year. This work was undertaken following a request by the Corporation of Hamilton to secure supply in the area, while also enhancing the aesthetics on the eastern side of Hamilton.

A total of $29 7,474 was spent designing, installing and commissioning a new battery system in the Company’s East Power Station to secure reliability of generation from engines housed in that section of the Company’s plant.

In Administration, the Company spent a final $83 1,568 on licence, support and consulting fees associated with implementation of its new $3.3 million customer accounting system, which was implemented on 19 January 2009. The company also acquired a number of new vehicles in 2009, costing $419,779 and required primarily by the Operations group to safely and effective - ly maintain overhead service lines. Replacement of old analogue security cameras with new digital cameras, with network-based technology, cost the Company $202,405. The Company also spent $ 173,872 to acquire hazardous material storage containers as part of its overall effort to comply with ISO 14001 environmental standard requirements.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 27 MANAGEMENT’S ANALYSIS OF RESULTS AND FINANCIAL CONDITION

Insurance Claim On 11 June 2009, the base load generating unit E7 alternator suffered a sudden and unforeseen failure as a result of a stator earth fault, which resulted in Island-wide load sheds. The equip - ment was removed and shipped overseas for repair, and the unit was subsequently returned to service on 2 January 2010. The Company incurred physical damage repair costs totalling $1,268,834, while additional fuel, oil and labour costs directly related to the failure totalled $2,543,577. A claim for $3,812,411 was filed by the Company under the terms of its insurance policy, seeking recovery of all costs incurred directly related to this engine failure. The insurance deductible under the existing insurance policy is calculated at $ 1, 129,779, comprised of $500,000 for physical damage and $629,779 for additional expenses. The claim is currently in the process of being reviewed by the insurer’s loss adjuster. The Company has set up an insurance receivable of $2,350,774 net of a $33 1,858 provision for potential non-collection of part of its total insurance claim.

Financing and Capitalisation The Company has a $35 million short-term facility with The Bank of N.T. Butterfield & Son Limited to finance short-term needs. At the end of the year, the Company had drawn down $25.5 million (2008: $15.0 million), which has been used to finance heavy fuel oil purchased under its fuel contract with British Petroleum, diesel fuel oil purchased under its fuel contract with ESSO Bermuda, and loan financing for the 2008 acquisition of Serpentine Properties Limited, as well as to address working capital requirements. Cash reserves were higher at the end of 2009, when compared to cash reserves at the end of 2008, by $1,832,528, due primari - ly to additional repayment against the outstanding balance of the existing facility not made until early January 2010.

BER MU DA GAS Bermuda Gas’ net earnings for the year increased to $1,268,408 from $419,382 in 2008, an increase of $849,026. Results in 2008 had been negatively impacted by high wholesale prices paid by the Company for propane gas, increased staff training costs, union negotiation costs, office moving costs, as well as reduced sales given economic uncertainty and conditions that existed that year.

The increase in 2009 net income is primarily due to improved profit results from the Company’s propane gas sales division, owing to better margins than in 2008. The benefits realised were offset by a total decline of 11.21 percent in gas sales revenues during the year compared to 2008, due primarily to the downturn in Bermuda’s economy, which had a dramatic impact on commercial sales volumes. Commercial gas sales volumes were down 3.45 percent on 2008, while residential gas sales declined 1.71 percent. A decrease in division operating costs also contributed to increased gas division profits.

Appliance units sold in 2009 were up 12.7 percent as compared to the number of appliances sold in 2008, contributing to a $383,501 or 30.94 percent increase in appliance sales gross profit. Significant increases in electric laundry, air conditioning and refrigeration units were the primary drivers behind the appliance sales growth realised for the year.

The operating results from the services and parts division improved by $40,256 or 26.27 percent.

28 PURE NERGY PureNERGY was unable to achieve its business plan budget results established for the year, due in part to problems in attaining timely Government planning permission necessary to proceed with a number of large customer projects, increased competition and general economic uncer - tainty in the marketplace. The Company also anticipated duty relief from Government on import of the energy-efficient and small-scale renewable products it sells, which are core to its busi - ness plan. Operating costs were also increased to address the sales volume contemplated but, given the various issues noted, the Company was not able to realise the return on these costs. As such, the Company posted a net loss of $ 1, 100,539 in this, its first full year of operation.

The Company is encouraged to see Customs duty relief for energy-efficient products and requirements that future buildings be “green” mentioned in Government’s 2 010 budget. However, the lack of specifics in this area, as well as reduced funding the Ministry of Energy will receive in 2010, are causes for concern. Both PureNERGY and Ascendant management are actively addressing the entity’s operating challenges, while continuing to seek market opportu - nity through ongoing dialogue with Government, review of operating costs and discussions with numerous potential customers. The Ascendant Group is firmly committed to the success of PureNERGY, as it forms an essential part of the Group’s vision for delivery of 20 percent of Bermuda’s energy from renewables by 2020.

BE LCO The Company’s revenues increased $38 1, 735 from $849,205 in 2008 to $ 1,230,940 in 2009, due PROPE RTI ES entirely to a full year’s rental revenues realised from the Company’s subsidiary, Serpentine Properties Limited, which was acquired in May 2008. The increase in revenue was offset by additional, full-year depreciation expense and interest expense on a loan used to finance the acquisition of Serpentine Properties Limited.

Future Reporting Changes As reported in the 2008 annual report, the Canadian Accounting Standards Board (AcSB) confirmed in February 2008 that the use of International Financial Reporting Standards (IFRS) will be required in 2011 for publicly accountable enterprises. In April 2008, the AcSB issued an IFRS Omnibus Exposure Draft, proposing that publicly accountable enterprises be required to apply IFRS, in full and without modification, on 1 January 2011. The transition date of 1 January 2011 will require the restatement, for comparative purposes, of the amounts reported by Ascendant and all subsidiary entities for the year ending 31 December 2010, and of the open - ing balance sheet as at 1 January 2010.

As a result of work undertaken during the year, Ascendant has positioned itself to successfully address IFRS mandatory reporting requirements in 2011. The Company completed its assess - ment of the information delivery capability of its existing accounting and financial reporting systems, successfully identifying changes deemed necessary to ensure 2011 financial reporting requirements under IFRS are met. These required system and reporting changes will be made in 2010. Ascendant will also identify and track, in 2010, all differences in accounting under Bermuda and Canada generally accepted accounting standards currently used by the Company to prepare its consolidated financial statements, and IFRS.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 29 REPORT OF MAN AGEMENT

The consolidated financial statements of Ascendant Group Limited presented in this report have been prepared by Company personnel in accordance with Bermudian and Canadian Generally Accepted Accounting Principles. The integrity and objectivity of the data in these financial state - ments are the responsibility of management. In preparing these statements, management makes informed judgments and estimates of the expected effects of events and transactions that are being reported.

The Company’s system of internal accounting control is designed to provide reasonable assur - ance that assets are safeguarded and transactions are executed according to management’s authorisation. Internal accounting controls also provide assurance that transactions are recorded properly, so that financial statements can be prepared according to Generally Accepted Accounting Principles. In addition, the Company’s accounting controls provide reasonable assur - ance that errors or irregularities, which could be material to the financial statements, are pre - vented or detected by employees within a timely period as they perform their assigned functions. The Company’s accounting controls are continually reviewed for effectiveness by management.

The accompanying consolidated financial statements have been audited by Pricewater- houseCoopers, independent auditors. Management has made available to Pricewaterhouse- Coopers all the Company’s financial records and related data, as well as representations we believe to be valid and appropriate. The accompanying report of the independent auditors is based on their audit conducted in accordance with Generally Accepted Auditing Standards.

A.L. VINCENT INGHAM ANDREW D. PARSONS President & Chief Executive Officer Treasurer

30 AUDI TORS’ RE PORT

Independent Auditors’ Report to the Shareholders

We have audited the accompanying consolidated balance sheet of Ascendant Group Limited as at 31 December 2009 and the consolidated statements of earnings, retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial state - ments based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in Bermuda and Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant esti - mates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2009 and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in Bermuda and Canada.

PRICEWATERHOUSECOOPERS Dorchester House Chartered Accountants Hamilton, Bermuda 30 March 2010

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 31 CONSOLI DATED BALANCE SHEET As at 31 December 2009

NOTES 2009 2008

ASSETS Fixed Assets Utility Plant, at Cost 3 $ 590,119,270 $ 577,456,583 Other Physical Property, at Cost 29,304,074 29,030,875

5 619,423,344 606,487,458 Accumulated Depreciation 5 (338,065,107 ) (337,545,714 )

281,358,237 268,941,744

Intangible Assets, Net 16 5,806,406 5,186,229

Current Assets Cash and Short-Term Investments 6,453,334 4,373,751 Accounts Receivable, less Provision 13, 17 18,979,361 19,913,831 Materials and Supplies 8 29,519,438 25,731,587 Fuel and Lubricants 8 25,335,789 20,042,257 Prepaid Expenses 9,709,084 7,290,352

89,997,006 77,351,778

$ 377,161,649 $ 351,479,751

CAPITALISATION Capitalisation AND LIABILITIES Capital Stock 6 $ 10,381,354 $ 10,340,094 Share Premium 6 27,102,430 26,517,887 Treasury Stock 6 (845,803 ) (827,695 ) Contributed Surplus 22,549,745 22,549,745 Retained Earnings 3 261,892,064 251,160,257

321,079,790 309,740,288

Current Liabilities Customer Deposits 342,431 600,500 Accounts Payable 9,679,683 7,516,007 Accrued Liabilities 19,859,745 17,222,956 Bank Borrowing 7 25,500,000 15,000,000

55,381,859 40,339,463

Other Liabilities Specific Provisions 9 700,000 1,400,000

$ 377,161,649 $ 351,479,751

The accompanying notes are an integral part of these Consolidated Financial Statements.

32 CONSOLIDATED STATEMENT OF EARNINGS For the year ended 31 December 2009

NOTES 2009 2008

Operating Revenue Sales of Electric Energy $ 227,008,540 $ 242,660,935 Less: Discounts 6,611,701 6,088,943

220,396,839 236,571,992 Gas Operations (Net of Cost of Goods Sold) 8,121,542 7,216,614 Property Operations 898,471 532,543 PureNERGY Renewables Operations (Net of Cost of Goods Sold) (360,829 ) 38,496 Other Income 1,643,904 1,707,491

230,699,927 246,067,136

Operating Expenses Energy Supply 3 137,007,790 156,887,039 Energy Delivery 9,293,586 9,121,562 Administration and General 31,840,422 27,552,041 Gas Operations 5,445,604 5,430,042 Property Operations 163,647 143,942 PureNERGY Renewables Operations 747,549 478,609 Depreciation and Amortisation 21,078,531 20,829,183 Taxes and Rent 5,516,906 4,991,393

211,094,035 225,433,811

Operating Income 19,605,892 20,633,325

Interest Expense Interest on Debt 258,812 465,492 Other 93,032 68,799

351,844 534,291

Earnings before Undernoted Items 19,254,048 20,099,034

Foreign Exchange Gain 401,996 166,336 Change in Fair Value of Held for Trading Investments (149,163 ) (166,262 )

Net Earnings for the Year 3 $ 19,506,881 $ 20,099,108 Basic and Fully Diluted Earnings Per Share 3 $ 1.88 $ 1.95

The accompanying notes are an integral part of these Consolidated Financial Statements.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 33 CONSOLIDATED STATEMENT OF RETAINED EARNINGS For the year ended 31 December 2009

NOTES 2009 2008

Balance – Beginning of Year 3 $ 251,160,257 $ 236,451,181 Adjustment to Opening Retained Earnings 3 – 3,369,460

251,160,257 239,820,641 Net Earnings for the Year 3 19,506,881 20,099,108 Dividends Paid (8,775,074 ) (8,759,492 ) Balance – End of Year 3 $ 261,892,064 $ 251,160,257

The accompanying notes are an integral part of these Consolidated Financial Statements.

34 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2009

NOTES 2009 2008

Cash Flows from Operating Activities Earnings from Operations 3 $ 19,506,881 $ 20,099,108 Adjustments to Cash Basis: Engine Overhaul Amortisation 3 3,074,405 2,941,156 Depreciation and Amortisation 21,078,531 20,829,183 Inventory Write Off 1,127,075 384,475 Specific Provisions (700,000 ) – Changes in Non-Cash Working Capital Balances: Accounts Receivable 934,470 (4,473,943 ) Inventory (10,208,458 ) 134,041 Accounts Payable, Accrued Liabilities and Customer Deposits 4,542,396 (304,044 ) Prepaid Expenses (2,418,732 ) (1,544,704 )

36,936,568 38,065,272

Cash Flow Used in Investing Activities Acquisition of Fixed Assets and Intangibles 3 (37,189,606 ) (38,703,976 )

Cash Flows from (Used in) Financing Activities Cash Proceeds from Issuance of Capital Stock 6 625,803 379,204 Purchase of Treasury Stock 6 (18,108 ) (827,695 ) Cash Proceeds from Bank Borrowing 75,000,000 65,500,000 Repayment of Bank Borrowing (64,500,000 ) (67,000,000 ) Dividends Paid to Shareholders (8,775,074 ) (8,759,492 )

2,332,621 (10,707,983 )

Increase (Decrease) in Cash and Shor t-Term Investments 2,079,583 (11,346,687 ) Cash and Shor t-Term Investments Beginning of Year 4,373,751 15,720,438 Cash and Shor t-Term Investments End of Year $ 6,453,334 $ 4,373,751

Supplementary Cash Flow Information Cash Interest Received $ 17,858 $ 167,931 Cash Interest Paid $ 597,390 $ 515,867

The accompanying notes are an integral part of these Consolidated Financial Statements.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2009

1 Significant Accounting Policies

These consolidated financial statements as at and for the year ending 31 December 2009, have been prepared in accordance with accounting principles generally accepted in Bermuda and Canada that are applicable to a going concern, which assumes that the Company will continue to operate for the foreseeable future and will be able to realise its assets and discharge its liabilities in the normal course of operations. The Company’s financial statements are presented in Bermuda Dollars, which are on par with US Dollars. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the report - ed amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the revenue and expenses during the reporting period. Actual results could differ from those estimates. The significant accounting policies are as follows:

a Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its six wholly owned subsidiaries, Bermuda Electric Light Company Limited (BELCO), Bermuda Gas & Utility Company Limited (Bermuda Gas), BTS Limited, InVenture Limited, BELCO Properties Limited and PureNERGY Renewables, Ltd. (PureNERGY). All material intercompany accounts and transactions are eliminated on consolidation.

b Sales

The sales of electricity are based on consumption recorded by meter readings taken monthly during the year. As in previous years, no account has been taken of unread consumption at the end of the financial year. Sales of propane gas and appliances are recognised upon delivery to customers. Sales of appliance parts sold over the counter are recognised at time of sale, and service sales are recog - nised at the time the service project is completed.

c Fixed Assets

Fixed assets are recorded at cost. Interest cost on funds borrowed for the construction of certain long- term assets has been capitalised. The capitalised interest is recorded as part of the asset to which it relates, and is depreciated over the estimated useful life of the asset.

Depreciation of generating plant, transmission and distribution equipment less estimated salvage value is calculated on a straight-line basis over periods ranging from 15 to 24 years. Depreciation of general plant and other physical property is calculated on a straight-line basis over periods ranging from three to 24 years. The calculation of depreciation is based on the cost of each group of assets from the actual date that they are brought into service.

d Cash and Short-Term Investments

Cash and short-term investments include cash on account and short-term, highly liquid investments with maturities of three months or less from the date of acquisition that are readily convertible to known amounts of cash, and that are subject to insignificant risk of change in value. No significant interest rate risk is associated with cash and short-term investments held as at 31 December 2009 and 2008.

36 e Materials and Supplies

Materials and supplies are recorded at the lower of average cost, less provision for obsolescence and net realisable value.

f Fuel and Lubricants

Fuel and lubricants are recorded at cost on a first-in, first-out basis.

g Foreign Currency Translation

Monetary assets and liabilities have been translated into Bermuda Dollars at rates of exchange that approximate those rates prevailing at the Company’s year end. Transactions in foreign currencies during the year have been recorded at actual rates of exchange when incurred. Gains or losses arising on foreign currency translations are included in earnings for the year.

h Basic and Fully Diluted Earnings Per Share

Basic and fully diluted earnings per share are calculated by dividing net earnings by the weighted average number of common shares outstanding during the year.

i Pensions and Employee Future Benefits

BELCO maintains a trusteed, non-contributory, defined benefit pension plan, covering all full-time employees hired prior to 1 January 2006. The cost of pension benefits earned by employees under the defined benefit pension plan is determined using the projected benefits method, prorated on service. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. The accrued benefit asset is included in prepaid expenses. Annual changes in net assets or obligations arising from changes in assumptions, plan amendments and transitional amounts are amortised over the expected average remaining service life of the employees covered by the plan. The excess of net experience gains or losses over 10 percent of the greater of the benefit obligation and the fair value of plan assets is amortised over the average remaining service period of active employ - ees. BELCO’s net benefit plan expense is included in administration and general expenses. BELCO also maintains a defined contribution plan for all employees hired after 31 December 2005. Contributions to the defined contribution plan are expensed as incurred.

Bermuda Gas maintains a defined contribution plan. Contributions to the defined contribution plan are expensed as incurred.

BELCO and Bermuda Gas provide post-retirement medical benefits for substantially all employees on retirement. The Company uses the accrual basis of accounting for these benefits, whereby an accru - al is made for the present value of the future benefits to be provided in the reporting period in which the employee has provided the related service. Annual changes in the post-retirement medical bene - fits obligation arising from actuarial gains and losses, changes in assumptions and plan amendments are amortised on a straight-line basis over the expected average remaining service life to full eligibili - ty age of employees covered by the plan.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

j Intangibles

The Company classifies goodwill and computer software as intangibles. The Company no longer records amortisation on goodwill. Goodwill is tested for impairment on an annual basis, or more frequently if impairment indicators arise, using the discounted cash flow valuation method. As at 31 December 2009 and 2008 there was no impairment of the Company’s goodwill. Computer software is amortised on a straight-line basis over five years. Software in progress is not subject to amortisa - tion until brought into service.

k Financial Instruments

The Company classifies short-term investments as held for trading, which are measured at fair value with gains and losses recognised in the statement of earnings. Financial assets and liabilities, other than those held for trading, are measured at amortised cost, and amortisation is calculated using the effective interest rate method.

The carrying values of cash and short-term investments, accounts receivable, bank borrowings, customer deposits, accounts payable and accrued liabilities approximate the fair value because of their short-term maturities.

2 Adoption of Accounting Standards

The Canadian Institute of Chartered Accountants (CICA) has issued a new accounting standard that is applicable to the Company’s 2009 fiscal year. The new accounting standard adopted is as follows:

Intangibles

Section 3064 of the CICA Handbook applies to interim and annual financial statements relating to fiscal years beginning on or after 1 October 2008. This section establishes standards for the recogni - tion, measurement and disclosure applicable to intangible assets. It replaces Section 3062, “Goodwill and Other Intangible Assets ”, and Section 3450 “Research and Development Costs ”. The Company has included the requirements of this new standard in Note 16, Intangible Assets. Implementation of this new standard has resulted in the transfer of $10,551,810 (2008: $9,307,448) from Utility Plant, at cost and the transfer of $5,463,410 (2008: $4,839,225) from Accumulated Depreciation to Intangible Assets on the Consolidated Balance Sheet. Unamortised goodwill of $718,006 (2008: $718,006), previously disclosed as a separate line item on the Consolidated Balance Sheet, is also included in Intangible Assets.

3 Change in Accounting Policy – Overhaul to Overhaul

The Company changed its accounting policy related to major engine overhauls during the year. The “overhaul to overhaul” accounting policy for major overhaul of plant engines was introduced to recognise that significant engine overhaul expenditures incurred in any given year have a useful life that is based on projected scheduled service hours that extend beyond the year in which the expen - ditures are made. The change in accounting policy for major engine overhaul expenditure was made to improve the relevance of yearly financial reported results previously influenced by the timing of scheduled major overhaul expenditures. The impact of the change in accounting policy on annual

38 results was to defer a net $5,167,630 in major engine overhaul expenditures incurred during the year, which will now be amortised and expensed based on the projected scheduled service hours. Retroactive adjustment on previously reported periods, due to this change in accounting policy, has impacted comparative balances as follows:

BALANCES ADJUSTMENT DUE PREVIOUSLY TO CHANGE IN RESTATED REPORTED ACCOUNTING POLICY BALANCE Opening Retained Earnings

1 JANUARY 2007: $ 236,451,181 $ 3,369,460 $ 239,820,641

Earnings

YEAR ENDED 31 DECEMBER 2008: (i) Energy Supply $ 155,560,720 $ 1,326,319 $ 156,887,039 (ii) Net Earnings $ 21,425,427 $ (1,326,319 )$ 20,099,108 (iii) Basic & Diluted EPS $ 2.07 $ (0.12 )$ 1.95

Balance Sheet Utility Plant, at Cost

31 DECEMBER 2008: $ 575,413,442 $ 2,043,141 $ 577,456,583

Closing Retained Earnings

31 DECEMBER 2008: $ 249,117,116 $ 2,043,141 $ 251,160,257

Cash Flows

YEAR ENDED 31 DECEMBER 2008: 1 Net Earnings $ 21,425,427 $ (1,326,319 )$ 20,099,108 2 Engine Overhaul Amortisation $0$2,941,156 $ 2,941,156 3 Fixed Assets $ (37,089,139 )$ 1,614,837 $ (38,703,976 )

4 Financial Statement Effects of Rate Regulation

The following describes the circumstance in which rate regulation affects the Company’s accounting for a transaction or event. Regulatory assets represent future revenue associated with certain costs expected to be recovered from customers in future periods through the rate regulation process. Regulatory liabilities represent future reductions or limitations of increases in revenues associated with amounts expected to be refunded to customers through the rate regulation process.

BELCO is rate regulated by the Bermuda Government Energy Commission. BELCO is required to sub - mit all requests for changes in basic customer tariff rates to the Energy Commission, which has the ultimate authority to approve or reject BELCO’s submissions. BELCO is also required to submit, on a monthly basis, requests for approval of the fuel adjustment rate. The fuel adjustment rate charge enables BELCO to recover the cost of fuel exceeding $30.00 per barrel from customers. The Energy Commission has ultimate authority to approve or reject BELCO’s monthly fuel adjustment rate request. As at 31 December 2009, the fuel adjustment under-recovery was $92,364 (2008: $2,332,956 fuel adjustment under-recovery) and is recorded in accounts receivable.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5 Fixed Assets Restated (See Note 3) 2009 2008 ORIGINAL COST ACCUMULATED NET BOOK NET BOOK DEPRECIATION VALUE VALUE

Generation Plant $ 284,088,761 $ (188,251,810 )$95,836,951 $ 91,705,269 Transmission Equipment 73,801,772 (30,363,280 ) 43,438,492 38,736,666 Distribution Equipment 172,650,404 (82,345,442 ) 90,304,962 88,278,259 General Plant 59,578,333 (31,872,225 ) 27,706,108 25,785,002 Other Physical Property 29,304,074 (5,232,350 ) 24,071,724 24,436,548

$ 619,423,344 $ (338,065,107 )$281,358,237 $ 268,941,744

Total capital work in progress of $15,479,033 (2008: $16,410,602) is embedded in fixed assets noted above. Capital work in progress is not subject to depreciation until brought into service.

6 Capital Stock 2009 2008

Capital stock comprises: Authorised – 20 million shares of a par value of $1 each (2008: 20 million par value $1) $ 20,000,000 $ 20,000,000

Issued and fully paid – 10,381,354 shares of a par value of $1 each (2008: 10,340,094 par value $1) $ 10,381,354 $ 10,340,094

A total of 23,744 shares (2008: 19,108) were purchased by employees under an Employee Purchase Scheme in 2009 at an average price per share of $14.54 (2008: $16.80), giving rise to an increase in share premium of $321,442 (2008: $301,815). Company shares issued to directors during the year as part of total directors’ fee compensation totalled 17,516 (2008: 2,802), giving rise to an increase in share premium of $263,101 (2008: $55,478). The average price of the shares issued to directors in 2009 was $16.02 (2008: $20.80). A total of 1,000 shares (2008: 40,200) were acquired on the open market at a cost to the Company of $18,108 (2008: $827,695). These shares were held as treasury shares, as at 31 December 2009.

7 Bank Borrowing

As at 31 December 2009, the Company had a variable rate $35 million loan facility with The Bank of N.T. Butterfield & Son Limited, that expires on 28 February 2010. This facility allows for draw downs in Bermuda Dollars and/or US Dollars. As at 31 December 2009, the Company has drawn down BD$25.5 million, bearing interest of 4.75 percent (2008: US$4 million, bearing interest of 1.54 percent and BD$11 million, bearing interest of 4.25 percent). Subsequent to the Company’s year end, this facility was renewed and expires on 28 February 2011.

40 8 Inventory

During the year, the Company expensed inventory totalling $126,056,799 (2008: $146,246,803) as part of normal operations. Inventory written off during the year totalled $ 1, 12 7,076 (2008: $384,475). Current year inventory write offs included inventory valued at $732 ,182, specifically supporting generation engine D2, which was decommissioned during the year.

9 Specific Provisions 2009 2008

Specific provisions comprise: Provision for uninsured risks: Transmission Equipment $ 100,000 $ 200,000 Generation Equipment 600,000 600,000 Consequential Loss – 600,000

$ 700,000 $ 1,400,000

The Company historically provided for uninsured risks as disclosed above. During the year, the Company began its preparation for conversion to International Financial Reporting Standards (IFRS) for 2011 public financial reporting by systematically eliminating all financial assets and liabilities that do not comply with IFRS requirements. The Company has written off one half of its total specific provisions in the current year and will write off the remaining balance in 2010.

10 Capital Management

The Company includes capitalisation, bank borrowing, cash and short-term investments in the defini - tion of capital as follows:

2009 2008

Capitalisation $ 321,079,790 $ 309,740,288 Bank Borrowing 25,500,000 15,000,000 Cash and Short-Term Investments (6,453,334 ) (4,373,751 )

$ 340,126,456 $ 320,366,537

The Company’s objectives, when managing capital, are to maintain sufficient liquidity and ongoing access to capital in order to allow the Company to build and maintain its generation, transmission, distribution and administrative systems. The Company’s capital management short-term strategy is to generate and utilise positive cash flows from operations to meet annual capital expenditure and dividend payment requirements. Where a shortfall exists between internally generated cash inflows and required cash outflows, short-term debt financing will be utilised. The Company also utilises a bank overdraft facility to address annual fuel financing requirements. The Company’s long-term strategic capital management plan considers all alternative financing options available to address large-scale plant generation expansion or replacement, and transmission and distribution projects.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11 Pensions and Post-Retirement Medical Benefits

BELCO maintains a trusteed, non-contributory, defined benefit pension plan, covering all full-time employees hired before 1 January 2006. For all employees hired subsequent to 31 December 2005, BELCO maintains a defined contribution plan. Contributions to the defined contribution plan amounting to $622,211 (2008: $432,518) were made during the year.

Bermuda Gas maintains a defined contribution plan. Contributions amounting to $143,317 (2008: $145,011) were made during the year.

BELCO and Bermuda Gas provide post-retirement medical benefits for substantially all employees on retirement.

The following table provides summaries of the pension and post-retirement medical benefits plans’ estimated financial positions, as at 31 December:

PENSION BENEFIT PLAN MEDICAL BENEFIT PLAN 2009 2008 2009 2008

Accrued benefit obligation Balance – Beginning of year $ 94,612,600 $101,481,800 $ 14,379,726 $ 12,675,151 Current service cost 2,504,700 2,873,700 328,518 309,162 Interest cost 6,647,100 6,130,160 1,139,184 1,040,572 Plan amendments and net actuarial (gain) loss 15,761,600 (11,500,660 ) 443,393 1,324,802 Benefits paid (4,317,400 ) (4,372,400 ) (1,041,325 ) (969,961 )

Balance – End of year $115,208,600 $ 94,612,600 $ 15,249,496 $ 14,379,726

Plan assets Fair value – Beginning of year $ 96,781,000 $112,318,200 – – Actual loss (gain) on plan assets 9,492,200 (13,841,400 ) – – Employer contributions 5,405,000 2,676,600 – – Benefits paid (4,317,400 ) (4,372,400 ) – –

Fair value – End of year $107,360,800 $ 96,781,000 – –

Funded status – plan surplus (deficit) $ (7,847,800 ) $ 2,168,400 $ (15,249,496 ) $ (14,379,726 ) Unamortised net actuarial loss 25,105,800 13,749,840 6,488,642 6,374,340 Unamortised transitional asset (8,483,900 ) (9,557,700 ) – –

Accrued benefit asset (liability) $ 8,774,100 $ 6,360,540 $ (8,760,854 ) $ (8,005,386 )

42 The significant actuarial assumptions in measuring the Company’s accrued benefit obligations are as follows (weighted-average assumptions, as at 31 December):

PENSION BENEFIT PLAN MEDICAL BENEFIT PLAN 2009 % 2008 % 2009 % 2008 %

Discount rate 6.00 7.00 8.00 8.00 Expected rate of return on plan assets 6.00 5.50 – – Rate of compensation increase 4.00 4.75 – –

For measurement purposes, the annual rate of increase in the per capita cost of covered healthcare benefits was assumed to be 11.0 percent for 2010 and, thereafter, reducing 1.0 percent per year until reaching 5.0 percent after six years. In 2008, it was assumed to be 11.0 percent for 2009 and, there - after, reducing 1.0 percent per year until reaching 5.0 percent.

The discount rate used by the Company’s actuary in determining the accrued pension and medical benefit obligations is, in the opinion of management, consistent with market interest rates at the measurement date of high-quality debt instruments with cash flows that match the timing and amount of the expected benefit payments. The discount rate used in determining the accrued medical bene - fit obligation is considered a sustainable internal rate of return.

The Company’s net benefit plan expense is as follows:

PENSION BENEFIT PLAN MEDICAL BENEFIT PLAN 2009 2008 2009 2008

Current service cost $ 2,504,700 $ 2,873,700 $ 328,518 $ 309,162 Interest cost 6,647,100 6,130,160 1,139,184 1,040,572 Actual (gain) loss on plan assets (9,492,200 ) 13,841,400 – – Actual (gain) loss on accrued benefit obligation 15,761,600 (11,500,660 ) 443,393 1,324,802

Pension loss before adjustment to recognise the long-term nature of the plans 15,421,200 11,344,600 1,911,095 2,674,536

Difference between expected and actual return on assets 4,139,300 (20,808,290 ) – –

Difference between actuarial (gain) loss recognised and actual actuarial gain (loss) on benefit obligation (15,495,300 ) 11,500,660 (114,302 ) (1,324,802 )

Amortisation of transitional asset (1,073,800 ) (1,073,800 ) – –

Adjustments to recognise the long-term nature of the plans (12,429,800 ) (10,381,430 ) (114,302 ) (1,324,802 )

$ 2,991,400 $ 963,170 $ 1,796,793 $ 1,349,734

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12 Segmented Information (in 000s)

Management has identified its reportable segments based on the different products and services that the operating companies offer. Restated ALL Restated ELECTRIC (See Note 3) OTHER ( a) TOTAL (See Note 3) 2009 2008 2009 2008 2009 2008

Total Revenues from External Customers $228,386 $244,054 $ 20,865 $ 21,459 $249,251 $265,513 Intersegment Revenues 46 51 855 479 901 530 Interest Revenue 23 76 279 329 302 405 Interest Expense 160 410 192 124 352 534

Amortisation of Capital Assets 20,058 19,974 1,020 855 21,079 20,829

Segment Profit 19,656 20,048 (149 ) 51 19,507 20,099

Segment Assets 351,165 325,043 25,997 26,437 377,162 351,480

Expenditures for Segment Capital Assets 36,657 24,044 533 14,660 37,190 38,704

a Revenues from segments below the quantitative thresholds are attributable to three operating segments of Ascendant Group Limited. Those segments include a propane supply company, proper - ty holding company and an alternative, renewable energy supply provider. The accounting policies of the segments are the same as those described in Note 1, Significant Accounting Policies. Reconciliation of segment revenues to total Company revenues is noted below. 2009 2008

Total Revenues for Reportable Segments $ 249,251 $ 265,513 Cost of Goods Sold and Discounts (18,551 ) (19,446 )

Total Company Revenues $ 230,700 $ 246,067

13 Financial Assets and Liabilities

The Company manages its exposure to credit, liquidity, market (including foreign exchange, interest rate and commodity) and other risks in accordance with established risk management policies and procedures. The Company’s financial instruments and their designations are (i) held for trading: cash and short-term investments; (ii) receivables: accounts receivable, less provision; and, (iii) current liabilities: bank borrowing, customer deposits, accounts payable and accrued liabilities.

Credit Risk: There is a concentration of credit risk as all Company cash is held with two Bermuda banks. There is further credit risk as the Company may not be able to collect all of its customer accounts receivable that arise in the normal course of business, but this does not represent a signifi - cant concentration of credit risk as amounts are owed by a large number of customers on normal credit terms. The requirement for security deposits for certain customers, which are advance cash collections from customers to guarantee payment of electricity billings, further reduces the exposure to credit risk.

44 The maximum exposure to credit risk is the net carrying value of these financial instruments. The Company manages credit risk primarily by executing its credit and collection policy, including the requirement for security deposits, through the resources of its Customer Service Business Centre. The ageing of trade receivables is as follows: 2009 2008

Not past due $ 13,768,498 $ 15,061,646 Past due 31-60 days 1,023,158 2,125,767 Past due 61-90 days 916,855 895,682 Past due over 90 days 3,236,877 1,857,231

18,945,388 19,940,326

Less: allowance for doubtful accounts (2,719,880 ) (1,921,054 ) Less: allowance for discounts (506,206 ) (579,201 )

15,719,302 17,440,071

Fuel adjustment under-recovery 92,364 2,332,956 Other receivables 3,167,695 140,804

$ 18,979,361 $ 19,913,831

Liquidity Risk: The Company’s financial position could be adversely affected, if it failed to arrange sufficient and cost-effective financing to fund, among other things, capital and operating expenditures, repayment of bank debt and pension funding obligations. The ability to arrange such financing is sub - ject to numerous factors, including the results of operations and financial position of the Company, conditions in the capital and bank credit markets and general economic conditions. The Company manages short-term liquidity risk primarily by maintaining a bank credit facility. The Company has an unsecured credit facility of $35 million with The Bank of N. T. Butterfield & Son Limited, as mentioned in Note 7.

Market Risk: Exposure to foreign exchange rate fluctuations is immaterial as all receivables and payables are generally settled within a month, other than those mentioned in Note 14, Commitments. The Company is also exposed to limited commodity price risk (refer to Note 14). Market-driven changes in interest rates and changes in the Company’s credit rating can cause fluctuations in interest costs associated with the Company’s bank credit facility. The Company periodically refinances its credit facility in the normal course of business.

The Company’s defined benefit pension plan is impacted by economic conditions. There is no assur - ance that the pension plan assets will earn the expected long-term rate of return in the future. Market- driven changes impacting the performance of the pension plan assets may result in material variations in actual return on pension plan assets from the expected long-term return on the assets. This may cause material changes in future pension liabilities and pension expense. Market-driven changes impacting the discount rate may also result in material variations in future pension liabilities and pension expense.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Carrying Values: Cash is carried at fair value. Short-term investments are designated as held for trading and are carried at fair value. The carrying value of receivables and current liabilities is amortis- ed cost.

Fair Values: The fair value of short-term investments is determined through reference to the last trade price of third-party stocks held and listed on the BSX. The fair value of the Company’s remaining finan - cial instruments approximates their carrying value, reflecting either their nature or normal trade credit terms.

Other Risks: As at 31 December 2009, the fair value of the Company’s primary defined benefit pension plan assets was $107.4 million compared to fair value of plan assets of $96.8 million as at 31 December 2008. The increase in the fair value of pension plan assets during 2009 was mainly the result of improved market conditions in 2009 as compared to 2008. The Company’s future pension funding obligations, based on the actuarial report for 31 December 2009, decrease to $4,996,000 (2008: $5,405,000). The Company does not expect any difficulty in its ability to meet future pension funding requirements, as it expects the amounts will be financed from a combination of cash gener - ated from operations and amounts available for borrowing under the existing bank credit facility.

14 Commitments

The Company has an arrangement with a fuel supplier to ensure adequate fuel will be available when needed for its electrical generation requirements. As at 31 December 2009, commitments under these contracts to acquire heavy fuel from January to April 2010 totalled US$19,464,950 (BD$19,610,937) (2008: US$48,424,000; BD$48,787,180).

The Company entered into a five-year engine parts and service contract, effective 1 January 2009, with MAN Diesel. The total value of this contract is €8,408,065 and is payable in equal yearly amounts of €1,681,613. The Company also signed an agreement with Centrax Gas Turbines of the United Kingdom in 2009 to supply, install and commission specific gas turbine generation plant. The Com- pany is committed under this contract to pay this vendor a total of £4,625,805 and US$3,839,820. The Company entered into a forward exchange contract in 2008 to acquire £462,576 in 2010 to service the balance of its British Pound commitment under this contract.

15 Long-Term Incentive Plan

The Company initiated a long-term incentive plan, effective 1 January 2009, aimed at retaining the services of its senior management group. This long-term incentive plan is a performance award divided equally between cash and shares. The performance target and results are set and assessed annually. The shares vest and become unrestricted at the end of three years. The total number of restricted shares allotted as at 31 December 2009 was 8,032 with a market value of $120,882. The total cost of the long-term incentive plan for 2009 was $299,366.

46 16 Intangible Assets

SOFTWARE TOTAL GOODWILL IN PROGRESS SOFTWARE VALUE

Year Ended 31 December 2008 Opening net book amount $ 718,006 –$929,664 $ 1,647,670 Acquisitions –$2,834,400 1,234,433 4,068,833 Disposals –––– Amortisation ––(530,274 ) (530,274 )

Closing net book amount $ 718,006 $ 2,834,400 $ 1,633,823 $ 5,186,229

At 31 December 2008 Cost $ 1,118,680 $ 2,834,400 $ 6,473,048 $ 10,426,128 Accumulated Amortisation (400,674 )–(4,839,225 ) (5,239,899 )

Net book amount $ 718,006 $ 2,834,400 $ 1,633,823 $ 5,186,229

Year Ended 31 December 2009 Opening net book amount $ 718,006 $ 2,834,400 $ 1,633,823 $ 5,186,229 Transfers – (2,834,400 ) 2,834,400 – Acquisitions – 5,788 1,238,575 1,244,363 Disposals –––– Amortisation ––(624,186 ) (624,186 )

Closing net book amount $ 718,006 $ 5,788 $ 5,082,612 $ 5,806,406

At 31 December 2009 Cost $ 1,118,680 $ 5,788 $10,546,022 $ 11,670,490 Accumulated Amortisation (400,674 )–(5,463,410 ) (5,864,084 )

Net book amount $ 718,006 $ 5,788 $ 5,082,612 $ 5,806,406

There was no impairment of intangible assets for the years ended 31 December 2009 and 2008. During the year ended 31 December 2009, $1,244,363 (2008: $4,068,833) of intangible assets subject to amortisation were acquired.

17 Insurance Claim

On 11 June 2009, the base load generating unit E7 alternator suffered a sudden and unforeseen failure as a result of a stator earth fault. The stator was repaired and this unit was subsequently returned to service on 2 January 2010. This matter is currently the subject of an insurance claim. The total claim filed under the Company’s insurance policy of $3,812,411 consists of physical damage repair costs ($1,268,834), as well as additional fuel, oil and labour costs incurred ($2,543,577). The insurance deductible under the existing insurance policy is calculated at $1,129,779. The claim is presently in process. The Company has set up an insurance receivable of $2,350,774 net of a $331,858 provision for potential non-collection of part of its total insurance claim.

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 47 CO MPA RATIVE STATISTICS 2000 – 2009

2009 2008 2007

Ascendant Group Net Earnings (BD$) (3) 19,506,881 20,099,108 20 ,399,518

Limited Earnings per Share of Common Stock (BD$) (1) (4) 1.88 1.95 1.98

Fully Diluted (BD$) (4) 1.88 1.95 1.98

Dividends Paid per Share (BD$) 0.85 0.85 0.83

Shareholders’ Equity (BD$) 321,079,790 309,740,288 295,479,703

Bank Loans and Notes (BD$) 25,500,000 15,000,000 16,500,000

Bermuda Electric Total Utility Plant (BD$) 590,119,270 577,456,583 561,897,923 Light Company

Limited Maximum Demand (Kilowatts) 122,300 119,800 117,700

Kilowatt Hours Generated (Thousands) 738,455 728,938 718,670

Annual System Load Factor 68.02% 68.67% 68.41%

Electricity Sales (Thousands of kWh) Residential 271,682 268,563 275,677 Commercial 326,728 319,018 314,334 Other 57,673 57,373 53,810 Total 656,082 644,954 643,821

Gross Revenue for Electricity Sales (BD$) Residential 68,369,024 64,386,543 62,050,283 Commercial 69,925,457 67,554,268 65,532,520 Other 12,387,449 12,241,136 11,871,254 Fuel Adjustment 76,374,743 98,546,435 55,193,552 Total 227,056,674 242,728,382 194,647,609

Net Price per Kilowatt Hour (Cents) (2) Residential 36.82 39.35 30.43 Commercial 31.31 34.75 27.75

NOTE: 1 Figures have been adjusted for stock split and stock dividend. NOTE: 2 Assuming average discount deducted and including proportionate share of Fuel Adjustment. NOTE: 3 Net earnings for 2005 include insurance settlement net proceeds of $8,118,040. NOTE: 4 The 2005 earnings per share including insurance settlement net proceeds of $8,118,040 is $2.78.

48 2006 2005 2004 2003 2002 2001 2000

21 ,618,657 28 ,539,158 18 ,482,511 17,268,247 22,510,495 20,937,724 20,469,065 2.10 1.99 1.81 1.70 2.22 2.07 2.03 2.10 1.99 1.81 1.70 2.22 2.07 2.03 1.22 1.54 1.54 1.54 1.54 1.54 1.43

282,798,684 268,868,037 247,688,525 236,457,764 226,688,499 209,934,206 195,881,280

7,000,000 19,000,000 31,500,000 13,000,000 14,000,000 24,000,000 24,000,000

536,007,256 504,750,278 481,209,583 442,466,198 413,715,238 401,940,100 390,992,431

117,200 113,800 108,200 114,600 108,000 106,200 103,000

708,937 694,081 667,196 664,356 643,905 615,037 603,313

67.80% 68.52% 68.48% 65.68% 66.47% 64.42% 65.59%

271,215 268,919 257,903 251,396 241,509 237,590 226,742 311,408 302,608 293,863 295,386 290,542 276,044 267,871 48,742 45,127 43,232 43,250 42,675 40,286 40,722 631,365 616,654 594,998 590,032 574,726 553,920 535,335

59,533,194 57,653,222 54,080,515 52,742,764 50,706,892 49,891,060 47,629,813 64,616,922 62,313,214 59,838,817 59,993,648 58,107,613 55,941,143 54,270,282 10,152,318 9,438,419 8,956,520 9,536,736 8,840,745 8,320,345 8,283,491 49,752,428 36,171,695 26,007,761 21,911,509 15,502,738 18,166,658 17,100,141 184,054,862 165,576,550 148,883,613 144,184,657 133,157,988 132,319,206 127,283,727

29.10 26.47 24.48 23.90 22.79 23.39 23.28 27.51 25.43 23.77 23.14 21.70 22.57 22.45

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 49 50

COMPA NIES BOARD OF D IRE CT ORS

ASCENDANT GROUP LIMITED J. MICHAEL COLLIER, J.P.

HEAD OFFICE Chairman of the Board, Ascendant Group, 27 Serpentine Road, Pembroke HM 0 7, Bermuda BELCO, Bermuda Gas, PureNERGY, InVenture, MAILING ADDRESS BELCO Properties, Serpentine Properties, BTS. P.O. Box HM 3392, Hamilton HM PX, Bermuda Director since 1989 and sits on the following committees: Executive, Finance, Tel: 441-298-6100 Fax: 441-292-8975 Human Resource & Compensation, Website: www.ascendantgroup.bm Nominating, Ad Hoc Pension Review 63, Retired, President & Chief Executive Officer, INVESTOR SERVICES The Bank of N.T. Butterfield & Son Ltd. Tel: 441-295-5111, Ext. 1213 E-mail: [email protected] REGINALD S. MINORS, A.M.I.M.I.

Deputy Chairman, Ascendant Group, BERMUDA ELECTRIC LIGHT COMPANY LIMITED BELCO, Bermuda Gas, PureNERGY, InVenture, HEAD OFFICE BELCO Properties, Serpentine Properties, BTS. 27 Serpentine Road, Pembroke HM 0 7, Bermuda Director since 1995 and sits on the following committees: Executive, Finance, MAILING ADDRESS Human Resource & Compensation, P.O. Box HM 1026, Hamilton HM DX, Bermuda Nominating, Ad Hoc Pension Review Tel: 441-295-5111 Fax: 441-292-8975 E-mail: [email protected] 65, President & Chief Executive Officer, Tools & Equipment Unlimited Ltd. Websites: www.belco.bm www.empoweringprogress.bm www.belcotalent.bm

BERMUDA GAS & UTILITY COMPANY LIMITED

OFFICE PENSION INVESTMENT ADVISORY COMMITTEE INCLUDES: 25 Serpentine Road, Pembroke HM 07, Bermuda Keith B. Spurling William C. DeSilva Jr. MAILING ADDRESS Maynard Dill, Electricity Supply Trade Union P.O. Box HM 373, Hamilton HM BX, Bermuda Leonard Grant, Electricity Supply Trade Union Tel: 441-295-3111 Fax: 441-295-8311 E-mail: [email protected] Website: www.bermudagas.bm SCHOLARSHIP COMMITTEE INCLUDES: Dr. Duranda Greene, Bermuda College PURENERGY RENEWABLES, LTD. Linda C. Smith Jennifer Smatt Adkins OFFICE 25 Serpentine Road, Pembroke HM 07, Bermuda CORPORATE OFFICER MAILING ADDRESS KEITH B. SPURLING, C.A. P.O. Box HM 1026, Hamilton HM DX, Bermuda Secretary, Tel: 441-299-2808 Fax: 441-295-2577 Ascendant Group , BELCO, Bermuda Gas, PureNERGY, InVenture, E-mail: [email protected] Website: www.purenergy.bm BELCO Properties, Serpentine Properties, BTS. Vice President, Corporate Services, BELCO INVENTURE LIMITED At 31 December 2009, the Directors of the Company held 39,722 shares; HEAD OFFICE the Officers of the Company held 27,110 shares. Companies that held 27 Serpentine Road, Pembroke HM 0 7, Bermuda greater than 5% of the shares are Murdoch & Company with 531,651, MAILING ADDRESS Argus Investment Nominees Limited with 559,271, Lawrie (Bermuda) P.O. Box HM 899, Hamilton HM DX, Bermuda Limited with 700,000 and Wilson & Company with 1,072,068 shares. No rights to subscribe for shares in Ascendant have been granted to or Tel: 441-298-6177 Fax: 441-292-8975 executed by any Director or Officer. There are no service contracts with Directors. BELCO PROPERTIES LIMITED

MAILING ADDRESS EXCHANGE LISTING P.O. Box HM 1026, Hamilton HM DX, Bermuda Ascendant’s shares are listed on the Bermuda Stock Exchange Tel: 441-295-5111 Fax: 441-292-8975 (BSX). BERMUDA STOCK EXCHANGE BTS LIMITED P.O. Box HM 1369, Hamilton HM FX, Bermuda

MAILING ADDRESS Tel: 441-292-7212 P.O. Box HM 1026, Hamilton HM DX, Bermuda Website: www.bsx.com Tel: 441-295-5111 Fax: 441-292-8975

52 A.L. VINCENT INGHAM, J.P., P .Eng DONNA L. PEARMAN, J.P.

Director since 1999, Ascendant Group, Director since 2008, Ascendant Group, BELCO, Bermuda Gas, PureNERGY, InVenture, BELCO and sits on the following committees: BELCO Properties, Serpentine Properties, Occupational Health & Safety & Environment BTS and sits on the following committees: 57, President, People’s Pharmacy Limited Executive, Occupational Health & Safety & Environment 61, President & Chief Executive Officer

GAVIN R. ARTON, M.B.A. STANLEY A. OLIVER, M.P.A., P .Eng

Director since 2000, Ascendant Group, Director since 2004, Ascendant Group, BELCO and sits on the following committees: BELCO and sits on the following committees: Executive, Finance, Human Resource & Nominating, Occupational Health & Safety Compensation, Pension Investment Advisory, & Environment, Scholarship Nominating, Ad Hoc Pension Review 66, Retired, Head of Civil Service 59, Retired, Senior Vice President, Global Director of Corporate Social Responsibility, XL Capital Ltd.

JAMES B. BUTTERFIELD KATHRYN R. SIGGINS, F. C.A.

Director since 1993, Ascendant Group, Director since 2004, Ascendant Group, BELCO and sits on the following BELCO and sits on the following committees: committees: Audit, Occupational Health Finance, Human Resource & Compensation, & Safety & Environment Ad Hoc Pension Review 59, Managing Director, Butterfield & Vallis 57, Chief Operating Officer, Northstar Group Holdings, Ltd.

A. DAVID DODWELL, J.P. RICHARD SPURLING

Director since 1988, Ascendant Group, Director since 1993, Ascendant Group, BELCO and sits on the following committees: BELCO and sits on the following committees: Audit, Pension Investment Advisory Audit, Nominating, Scholarship 61, President, The Reefs 64, Retired, Senior Partner, Appleby

PETER C. DURHAGER DR. WILBERT N.E. WARNER, F.R .C.P.(C), D.A.C.P. Director since 2003, Ascendant Group, BELCO, Bermuda Gas, PureNERGY, InVenture, Director since 1999, Ascendant Group, BELCO Properties, Serpentine Properties, BELCO and sits on the following committees: BTS and sits on the following committees: Occupational Health & Safety & Environment Executive, Finance, Human Resource & 55, Specialist Consultant, Internal Medicine Compensation, Nominating 39, Executive Vice President & Chief Administrative Officer, RenaissanceRe Holdings Ltd.

L.A. JOAQUIN, J.P., F. C.A. W. EDWARD WILLIAMS

Director since 2005, Ascendant Group, Director since 1993, Ascendant Group, BELCO and sits on the following committees: BELCO and sits on the following Audit, Ad Hoc Pension Review, Scholarship committees: Occupational Health & Safety 54, Retired, Managing Partner, & Environment, Scholarship Ernst & Young Bermuda 61, Property Manager, Coldwell Banker (Bermuda Realty)

ASCENDANT GROUP LIMITED 2009 ANNUAL REPORT 53 EXECUTIVE AND SE NIOR MAN AGE MENT

A.L. VINCENT INGHAM, J.P., P.E ng . JENNIFER SMATT ADKINS , M.A., M.S c.

President & Chief Executive Officer, Senior Vice President, Human Resources, Ascendant Group, BELCO, Bermuda Gas, Ascendant Group PureNERGY, InVenture, BELCO Properties, Serpentine Properties, BTS

WILLIAM C. DESILVA JR., C.M.A., F.C.M.A. LINDA C. SMITH

Executive Vice President, Senior Vice President, Corporate Relations, Ascendant Group, Bermuda Gas, Ascendant Group PureNERGY, InVenture

ANDREW D. PARSONS, M.B.A., C.A. ROBERT B. STEYNOR, P.E ng .

Treasurer, Senior Vice President, Operations, BELCO Ascendant Group, BELCO, Bermuda Gas, PureNERGY, InVenture, BELCO Properties, Serpentine Properties, BTS Executive Vice President, BELCO

CHRISTOPHER A. COELHO, C.A. DAMON E. E. WADE, M.B.A., C.Eng., M.I.E.E. Senior Vice President, Finance and Administration, BELCO Senior Vice President & General Manager, Bermuda Gas

MICHAEL D. DANIEL, C. Eng , M.I.E.T., KEVON R. MAKELL A.M.I.M ech. E Vice President & General Manager, Vice President, PureNERGY Engineering & Environment, BELCO

54 BANKERS The Bank of Bermuda Limited Hamilton, Bermuda

The Bank of N.T. Butterfield & Son Limited Hamilton, Bermuda

AUDITORS PricewaterhouseCoopers Hamilton, Bermuda

SOLICITORS Conyers Dill & Pearman Hamilton, Bermuda

Marshall Diel & Myers Hamilton, Bermuda

DESIGN & PRODUCTION ADVANTAGE LTD.

PHOTOGRAPHY STEPHEN V. RAYNOR

PRINTING ISLAND PRESS LIMITED ASCENDANTGROUPLIMITED Head Office 27 Serpentine Road, Pembroke HM 07, Bermuda Telephone: 441-298-6100 fax: 441-292-8975 website: www.ascendantgroup.bm